Easing Omicron Concerns May Lead To Continued Strength On Wall Street

The major U.S. index futures are currently pointing to a higher open on Thursday, with stocks likely to extend the strong upward move seen over the two previous sessions.

Easing concerns about the Omicron variant of the coronavirus may contribute to continued strength on Wall Street, as separate studies have indicated the new strain poses a lower risk of severe disease and hospitalization than the Delta variant.

However, experts such as the World Health Organization have cautioned that it is too early to draw conclusions on the new variant’s severity.

Early trading may also be impacted by reaction to a slew of U.S. economic data, including a report from the Commerce Department showing a continued acceleration in the pace of core consumer price growth.

A reading on inflation said to be preferred by the Federal Reserve showed the annual rate of core consumer price growth accelerated to 4.7 percent in November from 4.2 percent in October.

The data was included as part of a Commerce Department report showing personal income and spending both increased in line with economist estimates in November.

The Labor Department also released a report showing first-time claims for U.S. unemployment benefits came in flat in the week ended December 18th.

A separate report released by the Commerce Department showed new orders for U.S. manufactured durable goods spiked much more than expected in the month of November.

Stocks initially showed a lack of direction but moved sharply higher over the course of the trading day on Wednesday. With the upward move, the major averages extended the substantial rebound seen on Tuesday.

The major averages saw further upside going into the close, reaching new highs for the session. The Dow climbed 261.19 points or 0.7 percent to 35,753.89, the Nasdaq surged 180.81 points or 1.2 percent to 15,521.89 and the S&P 500 jumped 47.33 points or 1 percent at 4,696.56.

The strength that emerged on Wall Street may partly have reflected a positive reaction to the latest U.S. economic data, including a report from the Conference Board showing consumer confidence improved by much more than expected in the month of December.

The report showed the consumer confidence index climbed to 115.8 in December from an upwardly revised 111.9 in November.

Economists had been expecting the consumer confidence index to inch up to 110.7 from the 109.5 originally reported for the previous month.

Lynn Franco, Senior Director of Economic Indicators at The Conference Board, noted concerns about both inflation and Covid-10 declined despite reports of continued price increases and the emergence of the Omicron variant.

Housing stocks saw substantial strength on the day, resulting in a 2 percent jump by the Philadelphia Housing Sector Index.

The strength among housing starts came after the National Association of Realtors released a report showing existing home sales climbed to a ten-month high in November.

NAR said existing home sales jumped 1.9 percent to an annual rate of 6.46 million in November after climbing by 0.8 percent to a rate of 6.34 million in October.

Significant strength also emerged among gold stocks, as reflected by the 1.3 percent gain posted by the NYSE Arca Gold Bugs Index. Gold stocks moved higher along with the price of the precious metal.

Software, pharmaceutical and healthcare stocks also saw notable strength on the day, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are rising $0.34 to $73.10 a barrel after jumping $1.64 to $72.76 a barrel on Wednesday. Meanwhile, after climbing $13.50 to $1,802.20 an ounce in the previous session, gold futures are increasing $9 to $1,811.20 an ounce.

On the currency front, the U.S. dollar is trading at 114.30 yen versus the 114.10 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1307 compared to yesterday’s $1.1326.

Asia

Asian stocks firmed up amid light trading activity on Thursday as trading desks wind down for the Christmas break.

While separate studies indicated the Omicron variant poses a lower risk of severe disease and hospitalization than the Delta variant, the World Health Organization said it is too early to draw conclusions on its severity.

Chinese shares edged higher as the country redoubled efforts to control new virus outbreaks in a number of cities. The benchmark Shanghai Composite index rose 20.72 points, or 0.6 percent, to 3,643.34, while Hong Kong’s Hang Seng Index gained 91.31 points, or 0.4 percent, to settle at 23,193.64.

Japanese shares advanced as South Africa’s noticeable drop in new Covid-19 cases in recent days as well a study suggesting reduced risks of hospitalization and severe disease in people infected with the Omicron variant versus Delta helped lift airline stocks. Japan Airlines gained 2.1 percent and ANA Holdings added 2.3 percent.

Tokyu Fudosan Holdings shares jumped 4.4 percent after the property developer agreed to sell its Tokyu Hands home interior store chain.

The Nikkei 225 Index climbed 236.16 points, or 0.8 percent, to 28,798.37, marking its third straight session of gains despite Japan reporting the first community infections of the Omicron variant. The broader Topix closed 0.9 percent higher at 1,989.43.

Australian markets rose for a third straight session despite the country reporting 8,205 new cases, its highest daily caseload since the pandemic began. The benchmark S&P/ASX 200 Index rose 22.80 points, or 0.3 percent, to 7,387.60, marking the highest close in two weeks.

Gold miners, banks and healthcare stocks advanced, while tech stocks fell after three sessions of gains. Mining heavyweights BHP and Rio Tinto ended marginally lower.

Dairy firm Bega Cheese plunged 10.3 percent after the company outlined a raft of ongoing issues that are expected to hit its bottom line this financial year.

Seoul stocks rose for a third straight session, led by gains by tech and auto stocks on news of SK Hynix’s acquisition of Intel Corp.’s NAND memory chip business and Tesla’s overnight rally. The Kospi climbed 13.69 points, or 0.5 percent, to 2,998.17.

Europe

European stocks have risen to two-week highs on Thursday after new studies indicated the Omicron variant poses a lower risk of severe disease and hospitalization than the Delta variant. However, the World Health Organization said it’s too early to draw conclusions on its severity.

While the German DAX Index has climbed by 0.5 percent, the French CAC 40 Index is up by 0.3 percent and the U.K.’s FTSE 100 Index is up by 0.1 percent.

Swiss building materials firm Holcim has advanced after it signed an agreement to acquire Malarkey Roofing Products, a company in the U.S. residential roofing market.

Ryanair has also risen despite the low-cost airline doubling its annual loss forecast, citing the emergence of travel restrictions in several big markets.

Flutter Entertainment has also jumped. The Dublin-based gambling company said it has acquired online gaming operator Sisal from CVC Capital Partners Fund for 1.62 billion pounds ($2.16 billion).

Balfour Beatty has also rallied. Its U.S. subsidiary Balfour Beatty Communities has pleaded guilty and agreed to pay more than $65 million in fines and restitution for defrauding the U.S. Military.

Continental AG has also moved to the upside after its CEO told a magazine that the German automotive supplier could hit the upper end of its profit margin outlook in 2021.

On a light day on the economic front, preliminary data from Destatis showed the German import price index rose 24.7 percent year-on-year in November following a 21.7 percent increase in October. Economists had forecast a increase of 22.3 percent. The growth was the fastest since October 1974, when import prices rose 28.8 percent.

U.S. Economic Reports

First-time claims for U.S. unemployment benefits came in flat in the week ended December 18th, according to a report released by the Labor Department on Thursday.

The Labor Department said initial jobless claims were unchanged from the previous week’s revised level of 205,000. Economists had expected jobless claims to edge down to 205,000 from the 206,000 originally reported for the previous week.

Meanwhile, the report showed the less volatile four-week moving average edged up to 206,250, an increase of 2,750 from the previous week’s revised average of 203,500.

The Commerce Department also released a report showing personal income in the U.S. increased in line with economist estimates in the month of November.

The report said personal income rose by 0.4 percent in November after climbing by 0.5 percent in October. Economists had expected personal income to rise by 0.4 percent.

Meanwhile, the Commerce Department said personal spending advanced by 0.6 percent in November after jumping by 1.4 percent in October. The increase in spending also matched expectations.

A reading on inflation said to be preferred by the Federal Reserve showed the annual rate of core consumer price growth accelerated to 4.7 percent in November from 4.2 percent in October.

A separate report released by the Commerce Department showed new orders for U.S. manufactured durable goods spiked much more than expected in the month of November.

The Commerce Department said durable goods orders surged up by 2.5 percent in November following a revised 0.1 percent uptick in October.

Economists expected durable goods orders to jump by 1.6 percent compared to the 0.4 percent drop that had been reported for the previous month.

Excluding a sharp increase in orders for transportation equipment, durable goods orders climbed by 0.8 percent in November after rising by 0.3 percent in October. Ex-transportation orders were expected to increase by 0.6 percent.

At 10 am ET, the Commerce Department is scheduled to release its report on new home sales in the month of November. New home sales are expected to spike by 3.4 percent to an annual rate of 770,000.

The University of Michigan is also due to release its revised reading on consumer sentiment in December at 10 am ET. The consumer sentiment index for December is expected to be unrevised from the preliminary reading of 70.4, which was up from 67.4 in November.

At 11 am ET, the Treasury Department is scheduled to announce the details of this month’s auctions of two-year, five-year and seven-year notes.

Stocks In Focus

Shares of Ortho Clinical Diagnostics (OCDX) are seeing significant pre-market strength after the in vitro diagnostics companies agreed to be acquired by Quidel (QDEL) for approximately $6.0 billion in cash and stock.

Biotechnology company Novavax (NVAX) may also move to the upside after saying initial data showed its Covid-19 vaccine produces an immune response to the Omicron variant.

On the other hand, shares of SciPlay (SCPL) are likely to come under pressure after the digital game developer said talks regarding Scientific Games’ (SGMS) proposal to acquire the company have been terminated.

Mission Produce (AVO) is also moving sharply lower in pre-market trading after the fresh produce provider reported weaker than expected fiscal fourth quarter results.